You live in a country with a flat tax rate of 30% on all income, except for certain classes of tax-free municipal bonds....
You live in a country with a flat tax rate of 30% on all income, except for certain classes of tax-free municipal bonds. You are considering investing in two bonds that are equally risky in every respect except for their tax treatment. The present yield-to-maturity on the taxable corporate bond is 4.36%. Estimate what must be the equilibrium yield-to-maturity on the corresponding tax-free municipal bond so that will bear the same after-tax return? (The answer is a percent, round your answer to two decimal place, e.g. 4.75)
Homework Answers
Yield on Municipal Bond = Yield on Corporate Bond * (1 - Tax Rate)
Yield on Municipal Bond = 4.36% * (1 - 30%)
Yield on Municipal Bond = 3.05%
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You live in a country with a flat tax rate of 30% on all income, except for certain classes of tax-free municipal bonds....
You live in a country with a flat tax rate of 30% on all income, except for certain classes of tax-free municipal bonds....
You live in a country with a flat tax rate of 30% on all income, except for certain classes of tax-free municipal bonds. You are considering investing in two bonds that are equally risky in every respect except for their tax treatment. The present yield-to-maturity on the taxable corporate bond is 4.36%. Estimate what must be the equilibrium yield-to-maturity on the corresponding tax-free municipal bond so that will bear the same after-tax return? (The answer is a percent, round your...
You live in a country with a flat tax rate of 30% on all income, except for certain classes of tax-free municipal bonds....
You live in a country with a flat tax rate of 30% on all income, except for certain classes of tax-free municipal bonds. You are considering investing in two bonds that are equally risky in every respect except for their tax treatment. The present yield-to-maturity on the taxable corporate bond is 4.36%. Estimate what must be the equilibrium yield-to-maturity on the corresponding tax-free municipal bond so that will bear the same after-tax return? (The answer is a percent, round your...
flat tax rate is 30% on all income. you want to invest in two bonds. present yield to maturity is 4.36. what is the equ...
flat tax rate is 30% on all income. you want to invest in two bonds. present yield to maturity is 4.36. what is the equilibrium yield to maturity on the free municipla bond after tac return
(7-10) You pay a 32% marginal tax rate. You are considering investing in one of two...
(7-10) You pay a 32% marginal tax rate. You are considering investing in one of two bonds. First, there is a tax-free municipal bond that pays 4.30%. There is also a corporate (taxable) bond available with the same maturity and equal risks in all other senses to the municipal bond. In order to realize the same after-tax return for you, what rate must the corporate bond yield?
Personal After-Tax Yield Corporate bonds issued by Johnson Corporation currently yield 12%. Municipal bonds of equal...
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(7-10) You pay a 32% marginal tax rate. You are considering investing in one of two bonds. First, there is a tax-free municipal bond that pays 4.30%. There is also a corporate (taxable) bond available with the same maturity and equal risks in all other senses to the municipal bond. In order to realize the same after-tax return for you, what rate must the corporate bond yield?
Personal After-Tax Yield Corporate bonds issued by Johnson Corporation currently yield 12%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor be indifferent between these two bonds? Round your answer to two decimal places. % Corporate After-Tax Yield The Shrieves Corporation has $15,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 9.25%, state of Florida muni bonds, which yield 6% (but are not taxable), and AT&T...
Personal After-Tax Yield Corporate bonds issued by Johnson Corporation currently yield 9.5%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor be indifferent between these two bonds? Round your answer to two decimal places. 010 Corporate After-Tax Yield The Shrieves Corporation has $15,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 9%, state of Florida muni bonds, which yield 5% (but are not taxable), and AT&T...
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